ZiG Losing Value On Black Market
The newly introduced gold-backed Zimbabwe Gold (ZiG) currency is sliding on the black market even though it has marginally gained value against other currencies since its launch earlier this month.
Reserve Bank of Zimbabwe (RBZ) Governor John Mushayavanahu launched ZiG on April 5, with the new currency trading at 13.56 to the U.S. dollar, before firming to 13.34, as of 17 April.
However, according to VOA’s Columbus Mavhunga, reporting from Harare, Zimbabwe’s capital, ZiG is now trading at around 20 on the black market.
Chamunorwa Musengi, a street vendor in Harare, told VOA said he does not see ZiG boosting the economy because “We been through this before.” He said:
Let’s wait and see. Maybe it will boost our economy for some time. But I do not see anything changing with the new currency, because things are really tight at the moment. We have been through this before.
When they introduced bond notes, things stabilized for a short time and then it started sliding on the market. They are saying ZiG is around 13 — it will end up around 40,000 against the dollar.
For the moment, ZiG is trading electronically, with notes and coins coming into circulation on April 30.
In Zimbabwe, on the streets and in the informal market, plastic money and banknotes do not have the same value.
For instance, the discredited RTGS had slid to around 40 000 per USD when ZiG was introduced, while bond notes were changing hands at only 7 000 per US$1.
Bond notes refer to the physical version of the currency which was launched in 2019 (RTGS) after a decade of Zimbabwe using the U.S. dollar and other currencies.
Samson Kabwe, a kombi conductor, says he cannot wait for the physical notes and coins of ZiG to be released. He said:
We are for ZiG, especially for change. We had no small notes for change. If ZiG notes and coins come, the government would have done a great thing. We want it like now.
Meanwhile, Gift Mugano, an economics professor, is not optimistic about the new currency and believes it will go the way of the Zimbabwe dollar. He said:
[In] 2016, we introduced bond notes which were backed by an Afreximbank (African Export-Import Bank) facility of $400 million.
Afreximbank is an international bank with a reputation. However, that was not sufficient to guarantee the success of the bond notes. So it failed. Right? Why are we failing to guarantee stability?
There is no sustained production in the economy because you defend the economy with production.
Secondly, confidence issues. People do not trust this system because we have lost money several times.
Mushayavanhu insists ZiG will succeed because it is backed by reserves of gold and other minerals worth $175 million and $100 million cash. He said:
We are doing what we are doing to ensure that our local currency does not die. We were already in a situation where almost 85% of transactions are being conducted in U.S. dollars because [the] local currency was not living up to the function of store of value.
We are going to restore that store of value so that we can start reviving our currency. So, we are starting at $80 million worth, and as we get more reserves, we will gradually be moving towards greater use of the local currency.
It is my wish that if we get to the year (end) at 70-30, next year 60-40, and the year after 50-50; by the time we get to 50-50 people will be indifferent as to which currency they are using. That way we regain use of our local currency.
The central bank said for now, commodities like fuel will still be bought and sold using U.S. dollars.
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